Office of House Bill AnalysisC.S.S.B. 626
By: Duncan
Financial Institutions
Committee Report (Substituted)


Civil asset forfeiture provides a means for law enforcement to seize a
criminal's assets from financial institutions as contraband, despite a
lienholder's bona fide security interest in the property.  Under current
law, the lienholder must show that it acquired and perfected the security
interest prior to or during the commission of the offense, and at the time
the interest was acquired and perfected, that it did not know or have
reason to know of the offense or that it was likely to occur.  There are
concerns that this allows a prosecutor, depending upon the circumstance of
timing, to shift a loss that results from an individual's criminal activity
to a lienholder.  Additionally, there are concerns that the immediate and
unexpected withdrawal of accounts or assets from a bank, depending upon the
amount of the seizure in relation to the bank's assets, can jeopardize its
liquidity. C.S.S.B. 626  establishes procedures for the seizure of assets
from a regulated financial institution. 


It is the opinion of the Office of House Bill Analysis that this bill does
not expressly delegate any additional rulemaking authority to a state
officer, department, agency, or institution. 


C.S.S.B. 626 amends the Code of Criminal Procedure to set forth provisions
regulating the seizure of accounts and assets at regulated financial
institutions (institution).  The bill authorizes  an institution to pay an
account or tender assets held as security for an obligation owed to the
institution or transfer the depository account or assets to a segregated
interest-bearing account in the name of the attorney representing the state
as trustee at the time a seizure warrant is served.  The bill also requires
the institution to take action to segregate the account or assets
immediately upon service of the seizure warrant and to provide evidence of
the terms and the amount of the account or a detailed inventory of the
assets, certified by an officer of the institution, to the peace officer
serving the warrant.  If the institution fails to comply with the
obligations to release the depository account or assets to a peace officer
pursuant to a seizure warrant or transfer the account or assets, the bill
requires the court to order the institution and its culpable officers,
agents, or employees to pay actual damages, attorney's fees, and court
costs incurred as a result of the institution's failure to comply.  The
court may also find the institution and those persons in contempt.  The
bill releases an institution that complies with the provisions of the bill
from liability in damages because of the compliance.  The bill provides
that the right of the state to obtain possession of physical evidence or to
seize a depository account or other assets for purposes other than
forfeiture is not impaired (Art. 59.12). 

The bill provides for the disclosure of information relating to accounts
and assets at an institution by the attorney representing the state to a
financial institution regulator, but requires a primary state or federal
financial institution regulator (regulator) to keep information provided by
the attorney confidential.  The bill provides that a regulator commits an
offense if the regulator knowingly discloses information in violation of
this article.  The bill provides that an offense under these provisions is
punishable by confinement in jail for a period not to exceed 30 days, a
fine not to exceed $500, or both the confinement and fine  (Art. 59.13). 

The bill requires the attorney representing the state to notify the banking
commissioner who is required to  notify the appropriate regulators before
taking any action that implicates a potentially culpable officer or
director of an institution (Art. 59.14). 

The bill provides that if property is seized from the possession of the
interest holder who asserts an ownership interest, security interest, or
lien interest  in the property, the owner or the interest holder's rights
remain in effect during the pendency of proceedings as if possession of the
property had remained with the interest holder (Art. 59.02).  


September 1, 2001.


C.S.S.B. 626 modifies the original bill by providing that the forfeiture
provisions apply to contraband  as defined as property of any nature that
is used or intended to be used in the commission of a Class A misdemeanor
for the offense of illegal dumping of litter if the defendant has been
previously convicted twice of such an offense, rather than any money
laundering felony, only in a municipality with a population of 250,000 or
more (Sec. 59.02).  The substitute removes the provision that holds a peace
officer criminally liable if the peace officer intentionally subjects
another to seizure that the peace officer knows is unlawful (Sec. 59.03).